(The commentary below is an edited version of an Op-Ed
published in the Sunday, Oct. 1, Flint Journal.)

Legislation pending in the state House would streamline the
process of obtaining a cable TV franchise, which is the permission a company
needs to offer services. If enacted, the measure would promote competition among
video providers, which would greatly benefit consumers. Unfortunately, local
government officials are attempting to block reform with false claims and
twisted facts.

From the time cable lines began replacing TV antennas four
decades ago, municipalities have required cable firms, such as Comcast, to
obtain franchises under the assumption that cable service was a "natural
monopoly" in need of taming. This local regulation, which was never justified,
has become destructive now that there are assorted technologies and service
providers that consumers could choose from — if given the chance.

Municipal officials promise to negotiate in good faith with
prospective competitors. No doubt many would. But there are 1,200 franchising
authorities (governments) in Michigan. Requiring a firm to negotiate with each
municipality in which it wants to do business constitutes an enormous obstacle
to competition. House Bill 6456 would instead create a uniform statewide
franchise to streamline the process.

Evidence abounds that franchising by cities and townships
costs consumers. Cable TV rates in markets without meaningful competition run as
much as 25 percent higher than in competitive markets. According to my analysis,
per-channel cable rates in southeast Michigan have undergone, on average, an
annualized rate of increase that is nearly 38 percent above the inflation rate
from 1991 to 2006.

Local officials say they must control franchising to
regulate the use of public property on which network infrastructure is located.
In fact, the pending legislation would not diminish this authority. They also
argue that local franchising is necessary to prevent cable companies from
"redlining" poor neighborhoods. But the legislation would maintain service
quotas for low-income households. So, what’s the problem?

The most egregious deception, however, is the claim that
reform would rob municipal budgets of franchise fee revenue, thereby
jeopardizing vital services. In reality, franchise revenues would increase.
Competition spurs lower rates, and to the extent that rates drop, current
customers are likely to upgrade their service, while households that currently
don’t subscribe will do so.

Researchers Robert W. Crandall and Robert Litan concluded
that competition would increase the number of video subscribers between 29.7
percent and 39.1 percent. Consequently, franchise fee receipts would increase by
between $249 million and $413 million per year nationwide, they found.

Michigan lawmakers would also do well to remember that
cable operators pass the cost of franchise fees paid to local governments
directly to customers. Any attempt to artificially inflate franchise revenue
would constitute a tax hike. As it is, Michigan municipalities already collect
$38 million annually in franchise fees — along with a slew of other perks, such
as free air time.

Where franchise reform has been adopted, the benefits have
been both immediate and substantial. The recent passage of statewide franchising
in Indiana, for example, prompted AT&T to announce an expansion of high-speed
DSL service to 33 rural communities. An analysis by the Perryman Group projects
more than $3.3 billion in new telecom investment for Texas.

Much of the local franchise regulation in force today was
fashioned in the 1960s and 1970s — the cyberspace equivalent of the Stone Age.
Besieged by plant closings and job losses, Michigan cannot afford to reject
reforms that would benefit consumers and promote high-tech investment in the
state.

Diane Katz is director of science, environment and
technology policy at the Mackinac Center for Public Policy.